Auto makers rejoiced amid record sales in Canada and the United States in 2015 that were driven by low interest rates, cheap gas, pent-up demand and stable economies – all of which point to even better years in the second half of the decade.
Auto makers delivered 1.898 million vehicles in Canada last year, the third-straight record performance, while Americans drove off dealers' lots with 17.42 million new sets of wheels, surpassing the high set in 2000.
Last year "was a standout year for the auto industry," summed up Bill Fay, group vice-president of Toyota Motor Sales U.S.A. Inc.
There are few clouds on the horizon, industry officials and analysts said Tuesday, as the financial crisis of 2008-09 all but disappeared in the auto makers' rear-view mirrors.
"The biggest negative is debt and interest rates," said industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. "Is there a higher cost of borrowing this year and does it get reflected in the marketplace?"
But even if the Bank of Canada changes course and starts to raise interest rates, the vehicle market should continue to be buoyed by a flood of new or redesigned vehicles and replacement of older vehicles. There are a record 10 million vehicles on Canada's roads that are 10 years old or older, which should keep spurring replacement demand, Mr. DesRosiers said.
Canadian sales this year are likely to be within a few percentage points of 2015 levels up or down, he said, but a market of almost 1.9 million vehicles in Canada "is a spectacular market."
Sales in the U.S. should hit 18.2 million this year and keep rising until they reach 19.5 million in 2018, analyst Adam Jonas said in a research note Tuesday.
"Auto sales could approach 20 million units this cycle driven by the four Cs: credit, capacity, currency and cash," said Mr. Jonas, who follows the industry for Morgan Stanley & Co. Inc.
He could have added a fifth C – crossovers, sales of which soared in both the U.S. and Canada last year as gas prices fell, leaving sales of subcompact and compact cars in the dust. Subcompacts fell to such an extent that Mazda Motor Corp. halted sales of its Mazda2 model.
The trend was evident in numbers from almost every auto maker.
The subcompact Fiesta and compact Focus cars sold by Ford Motor Co. fell 5 per cent and 26 per cent, respectively, in the U.S. market, while sales of the Canadian-built Edge crossover surged 29 per cent.
Sales of Toyota's Prius hybrid vehicle slumped 11 per cent, while RAV4 crossovers built in Woodstock, Ont., posted an 18-per-cent sales gain.
In Canada, sales of Honda's Fit and Civic passenger cars fell – although Civic retained the title of best-selling passenger car in the country – while deliveries of CR-V and Pilot crossovers rose.
The rush to crossovers has also affected the market for large passenger cars, said George Badanai, president of Badanai Motors Ltd., a GM dealership in Thunder Bay, Ont.
At the city's dealerships, all auto makers combined sold just 33 full-sized cars through the first 11 months of the year, Mr. Badanai said.
Crossovers are popular among younger drivers and those older than 55, he added, noting that for the first time in the 30 years he has been selling vehicles, he has seen one segment popular with those two groups of buyers at the same time.
Sales at his dealership rose 10 per cent, driven by the Chevrolet Equinox crossover – the top seller in that segment for General Motors of Canada Ltd. over all – and the Silverado pickup truck.
In the Canadian market, there was a change at the top of the sales rankings, as FCA Canada Inc. (Chrysler) took top spot for the first time, knocking Ford Motor Co. of Canada Ltd. out of first place.
Luxury brands increased their sales and market share again last year.
Sales for all luxury brands rose in Canada, with the exception of Jaguar, leading to record performances for many of those brands. Although Jaguar sales fell, Land Rover sales surged 23 per cent, leading to a record tally for Jaguar Land Rover Canada.